Weakness in SpaceX shares has raised concerns about the broader momentum behind artificial intelligence (AI) IPOs. (AP photo)
SpaceX, which made founder Elon Musk the world’s first trillionaire, is set to lose more than $1 trillion in market capitalization from its record high. Shares of SpaceX, the aerospace and artificial intelligence company, fell sharply on Friday.After falling as much as 6.9% in early US trading to $122.12 per share, the stock has recovered some of its losses. At this level, the company’s market cap was $1.61 trillion, down from its high of $2.64 trillion at the close of the third trading session on June 16, according to a Bloomberg report.The Elon Musk-led company, formally known as Space Exploration Technologies Corp., has soared in value after what was described as the largest initial public offering in history. However, the stock has fallen sharply since then and is now trading below its IPO price of $135.
Why did SpaceX stock price fall?
Friday’s decline came after the company’s decision to cancel the launch of its Starship rocket due to an engine issue, with SpaceX saying another attempt would be made within the next few days.Earlier this month, SpaceX was added to the Nasdaq-100 and also received a string of bullish analyst ratings. The stock currently carries an average 12-month price target of $235.34.
Weakness in SpaceX shares has raised concerns about the broader momentum behind artificial intelligence (AI) IPOs. Artificial intelligence forms a key part of the company’s IPO narrative as it pursues plans to deploy data centers in the space, targeting what it estimates as a $26.5 trillion total addressable market.The record public offering also provided a big boost for Wall Street’s leading investment banks, which generated their highest revenue from advising on equity offerings in the second quarter since 2021.According to a recent Reuters report, short sellers betting on SpaceX have amassed an estimated $8.7 billion in unrealized gains since the company’s initial public offering last month. The report quoted data from the analytics company Ortex Technologies, as the stock fell below its IPO price.Investors taking short positions — who borrow shares, sell them and later seek to buy them back at a lower price to make a profit — continued to increase their bearish bets as SpaceX shares fell from their post-listing high of $225.64 toward their IPO price of $135.“SpaceX was a whirlwind for short sellers, and it ended up going strong for them,” said Peter Hellerberg, co-founder of Ortex. “Instead of taking profits, the bears kept falling all the way.”According to Ortex, approximately 49% of SpaceX’s free shares, or roughly half of the shares available for trading, are currently on loan.“We think most of it is short selling,” Hellerberg reportedly said.SpaceX’s high market valuation has made it an attractive target for investors who believe the stock is overvalued. At the same time, strong participation from retail and institutional investors, combined with CEO Elon Musk’s long history of publicly confronting short sellers, continues to make bearish bets on the company a high-risk strategy.(Disclaimer: Recommendations and opinions regarding stock market, any other asset classes or personal finance management advice given by experts and analysts are their own. These opinions do not represent the views of The Times Of India.)